JPMorgan predicts more growth

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NEW YORK (CNNMoney) -- JPMorgan said Friday that it plans to keep expanding, even as its latest quarterly earnings took a big hit from losses in investment banking and trading.

"No we are not pulling back" said CEO Jamie Dimon on a conference call, following the release of the company's quarterly earnings.

In fact, Dimon reiterated plans to build out JPMorgan's branch network, particularly in Florida and California.

JPMorgan recently passed Bank of America as the largest bank by assets in the United States, and it's one of the only U.S. banks that has not announced plans for additional layoffs in recent months.

The outlook for the banking sector as a whole has been clouded by the sluggish economy, ongoing problems in the housing market and a host of new government regulations that could hit banks' most profitable business lines.

JPMorgan said it earned $3.7 billion, or 90 cents per share, in the final three months of 2011. The results were in line with estimates but down 23% from $4.8 billion, or $1.12 per share, in the same period a year ago.

Despite a troubled fourth quarter, JPMorgan's net income rose 9.2% in 2011 to $19.2 billion, or $4.48 per share, from $17.4 billion, or $3.96 a share, in 2010.

As JPMorgan is the first of the major banks to report earnings, its results and Jamie Dimon's pronouncements are typically seen as harbingers of how its competitors will fare.

Europe braces for S&P downgrades

Skittish investors also remain focused on Europe's debt problems and banks' exposure but Dimon said "not much has changed" for JPMorgan from October, when it revealed $15.1 billion in net exposure to the five most troubled European economies -- Greece, Portugal, Ireland, Italy and Spain.

Meanwhile, Dimon praised the effects of the European Central's Bank's Long Term Financing Operations, which has pumped some €500 billion worth of 3-year loans into the banking system last month.

It was a rare piece of praise for a governmental or international banking body from Dimon, who used any opening to criticize U.S. and international banking regulators including the Dodd-Frank Wall Street Reform Act and the rules of the international Basel Committee.

Dimon used populist rhetoric to launch an attack on the Volcker Rule, which puts limits on banks ability to use their own funds to conduct trades, saying it would hamper the supply of funding in global markets for business activities like hiring and even Americans' ability to save for retirement.

"If you lose liquidity and market makers, it will cost retirees, pensioners, and the military more money to invest their money," said Dimon, urging Congress to be "careful not to destroy that."

JPMorgan's results spooked investors Friday. Shares of JPMorgan (JPM, Fortune 500) fell about 3% Friday. Bank of America (BAC, Fortune 500), Goldman Sachs (GS, Fortune 500), Morgan Stanley (MS, Fortune 500), and Citigroup (C, Fortune 500) all dropped about 2%.

JPMorgan by the numbers: Investment banking revenues were down roughly 39% in the fourth quarter 2011 compared to the same quarter in 2010. By comparison compensation for the investment banking division dropped just 9% from 2010. The average salary of a JPMorgan investment banker fell to $341,552 for 2011.

JPMorgan's executives blamed low trading volumes for the drop and emphasized that the company retained the number one position in fee generation among investment banks.

Net income from investment banking fell 52% to $726 million. The drop reflects a $567 million loss related to a narrowing of the spreads between interest rates on certain assets.

Excluding those so-called debit valuation adjustments, or DVA, JPMorgan said its investment banking division would have earned $1.1 billion.

Earlier this year, JPMorgan and other major U.S. banks had benefited from such adjustments.

Net income from JPMorgan's asset management business sank 40% to $302 million in the fourth quarter.

On the bright side, Dimon said the bank is beginning to see signs of improvement in loan demand and credit quality as the economy continues to recover.

"Mortgage underwriting volume will loosen not tighten and the housing market will turn at some point," said Dimon. He wouldn't say when but hinted that it could be at some point in 2012.

JPMorgan said its real estate portfolio lost $11 million in the fourth quarter, compared with a loss of $823 million a year ago.

In addition, the bank set aside $646 million as a provision for losses in its real estate portfolio. That's down from a provision of $2.3 billion in the same period a year ago.

Dimon also said it's increased lending to small businesses by 52% in 2011 handing out $17 billion in loans.